This archive report was first published on 25 August 2020.
On August 25, 2020, Absa Group, a leading South African financial services organization, revealed a significant decline in its Half-year Net earnings. The lender's net earnings plummeted by 82% due to increased provisions against potential credit losses, which rose four-fold to $869.8 million.
According to Absa Group, the challenging economic environment for businesses and individuals is expected to worsen for the remainder of the year. The lender has attributed this decline in financial performance to huge provisions as customers struggled to repay their loans.
As of June 30, Absa had provided $514.8 million in relief on $9.1 billion worth of loans to 538,000 customers, including 20,000 businesses in South Africa. The lender's Corporate and Investment Banking South Africa assisted clients on a one-to-one basis and granted payment relief on 12% of loans on its books.
Absa Group's subsidiaries were also affected by the pandemic, with a five-fold increase in provisions. These subsidiaries provided customers with payment relief on loans totaling $1.5 billion.
Separation from Barclays ¶
Despite the challenges posed by the pandemic, Absa continued to deliver against major business imperatives during the period. The lender achieved substantial separation from Barclays and completed the process of renaming and rebranding its operations in 12 countries.
The separation has fundamentally improved Absa's resilience, systems, and capabilities, benefiting staff and customers. The South African business of Absa Group pre-provision profits increased by 10% in the prior year, while credit impairments rose significantly due to the challenging macro backdrop for borrowers.
